Why It Matters
Tennessee is now defending its Fair Rx Act against three separate federal lawsuits filed by major pharmacy benefits managers, setting up a legal battle that could determine whether states can regulate how PBMs structure their business operations. The outcome may affect how prescription drug costs are managed for millions of patients nationwide.
What Happened
Express Scripts, CVS, and the Pharmaceutical Care Management Association each filed lawsuits against Tennessee this month challenging a new state law that prohibits pharmacy benefits managers from owning pharmacies within the state. The three cases are expected to be consolidated into a single proceeding.
Governor Bill Lee signed the Fair Rx Act into law in May following bipartisan passage in the legislature. The law emerged partly from a state audit by the Tennessee Department of Commerce and Insurance, which found that PBMs reimbursed their affiliated pharmacies at significantly higher rates than they paid to independent, non-affiliated pharmacies.
CVS, which operates 134 stores in Tennessee, faces the most direct business impact. The company owns CVS Caremark, one of the nation’s largest PBMs, as well as Aetna insurance and its retail pharmacy chain — making it a vertically integrated target of the law. CVS spent more than $1.3 million on an advertising campaign attempting to stop the legislation before it passed.
By the Numbers
Three major companies — CVS Health, Express Scripts, and Optum — together control nearly 80 percent of the PBM market nationally, giving them substantial leverage in prescription drug pricing and pharmacy reimbursements.
CVS operates 134 retail pharmacy locations in Tennessee that would be affected by the ownership ban. The company’s lobbying and advertising effort against the bill exceeded $1.3 million. Arkansas passed a similar PBM ownership ban in 2025, though a federal judge subsequently blocked it from taking effect.
Conflict of Interest Questions
The bill’s legislative supporters include several state lawmakers with direct ties to the pharmacy industry. Senate sponsor Bobby Harshbarger, a Republican from Kingsport, has family members who own a local pharmacy. Co-sponsors include Lt. Gov. Randy McNally of Oak Ridge, Sen. Shane Reeves of Murfreesboro, and Sen. Ferrell Haile of Gallatin — all of whom are licensed pharmacists.
House Speaker Cameron Sexton of Crossville also co-sponsored the legislation. His wife is affiliated through a consulting firm, TruPharm, with the state pharmacists association — a group that stands to benefit directly if PBMs are barred from owning competing retail locations.
Zoom Out
Tennessee’s legal fight mirrors what Arkansas encountered after enacting similar legislation. A federal judge blocked the Arkansas law, ruling it likely violated the U.S. Constitution’s Commerce Clause, which restricts states from passing laws that improperly burden interstate commerce. That ruling is now a central precedent the PBMs are expected to invoke in the Tennessee litigation.
State-level efforts to curb PBM market power have grown across the country as independent pharmacies struggle to compete with vertically integrated corporations that simultaneously manage drug benefits, set reimbursement rates, and operate retail locations. Independent pharmacy groups argue the arrangement creates an inherent conflict of interest that disadvantages smaller competitors.
What’s Next
The three Tennessee lawsuits are expected to be consolidated into a single case, similar to how the Arkansas litigation was handled. Tennessee will need to defend the law against Commerce Clause arguments while also making the case that the audit findings — showing higher reimbursements to affiliated pharmacies — justify the ownership ban as a legitimate consumer protection measure.
The Commerce Clause precedent from Arkansas makes Tennessee’s legal position challenging, though the state audit provides a factual record that could distinguish the cases. A ruling blocking the law, even temporarily, would effectively allow PBMs to maintain their current ownership structures in Tennessee while litigation proceeds.
The legal outcome could influence similar efforts in other states weighing legislation to break up vertically integrated pharmacy benefit management structures.